Corinthian Colleges' closure threat alarms Bay Area students

Former Heald College student Krystle Powell, 30, poses for a photo in Millbrae, Calif, on Friday, June 20, 2014.(John Green/Bay Area News Group)

With one of the country's biggest for-profit colleges suddenly threatening to shut down, thousands of Bay Area students are on edge after learning their costly pursuits of a degree are in jeopardy.

Corinthian Colleges Inc., the embattled corporate owner of Heald, Everest and WyoTech career colleges, warned Thursday that it could go under after federal regulators cut off its access to student loans, accusing the company of altering students' grades and falsifying its graduates' job placement claims.

The schools have 27,000 students in California and more than 70,000 nationwide.

"I'm very distressed," said Angela Keers, who is studying accounting at Heald College in Concord. "I've invested probably about $16,000 to $18,000 in my program so far, and I'm halfway done."

The company relies heavily on student aid dollars to stay in business -- $1.4 billion a year in federal student loans and grants, according to a Department of Education statement Thursday. But the department said it put a 21-day freeze on that revenue stream last week "after the company failed to address concerns about its practices.''

That delay will cause a cash-flow crisis the company might not survive, Corinthian reported in a Securities and Exchange Commission filing Thursday.

Keers said she frantically called Heald on Friday morning to find out what was happening, but got no solid answers. The 32-year-old Antioch resident said she went back to school last year after 15 years as a restaurant server and was counting on the accelerated 18-month program to get her back to work.

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"It would be devastating" if her school shut down, she said.

There is a financial safety net for students whose schools close. The government forgives the federal student debt -- including parent loans -- of those enrolled in a school when it closes, or who withdrew shortly before. California students left stranded mid-program are also eligible for private loan relief through California's Student Tuition Recovery Fund.

"It's obviously upsetting for students," said Robyn Smith, of the National Consumer Law Center. "The good news is most students in California will be OK financially at the end of the day because they should get those loans discharged."

But students won't be able to recover the time they spent working toward a degree that suddenly vanished, and in most cases, their course credits won't transfer to community colleges or public universities.

Students and employees at Heald College's campus in San Jose are preparing for the possibility that they will return to locked doors after the weekend, said an employee who asked to remain anonymous because workers were told not to talk to reporters.

Staff members were told in a Friday meeting that even if the school stays open, they might not be paid until mid-July, the employee said.

A message to the school's director was not returned Friday.

Corinthian's practices and high rates of student-loan default have been investigated by numerous states and federal agencies in recent years. Last fall, California Attorney General Kamala Harris sued the company, saying it intentionally recruited poor and vulnerable students, signing them up for costly loans they had little hope of repaying and advertising programs that didn't exist.

The schools have already harmed too many students and should close immediately, said Krystle Powell. The South San Francisco resident says Heald lured her into an expensive program with a class that was no longer taught and later, after she complained, forced her to leave before she could finish her studies. Now, she said, she has a $29,000 debt she can't afford to repay.

On the other hand, Powell said, "I feel really bad for the people who are still attending and thinking they were going to get something, that they will get a degree. What happens to them?"

That's a question countless students are asking themselves this week. And it's why, if Corinthian closes, Smith said, the Department of Education should contact the company's former students and tell them they qualify for relief from their loan debts, called a "closed-school discharge."

Otherwise, she said, too many students won't know they have the right to relief, and won't apply for it.

Corinthian would be one of the biggest schools to ever close, if not the biggest, Smith said. "I don't remember anything like this."